HC notice over tax recoveries from social websites

Indo Asian News Service

20 February 2013

New Delhi, Feb 20 (IANS) The Delhi High Court Wednesday issued notice to the finance and home ministries on a plea to recover tax from social networking websites, arising out of their internet-based business in the country.

A division bench of Justice B.D. Ahmed and Justice R.V. Easwar also issued notices to the law and information and broadcasting ministries and department of personnel. The court sought responses of central ministries within six weeks and posted the matter for April 9.

The court earlier sought response from the information technology ministry and social networking sites Facebook India and Google India.

The court's direction came on a public interest litigation filed by former Bharatiya Janata Party ideologue K.N. Govindacharya.

He asked the court to direct the government to recover all "past and present" direct and indirect tax demands arising from business income from Indian operations of different social networking websites.

The petition sought direction to ensure proper accounting compliances as per the Reserve Bank of India guidelines.

Govindacharya pleaded for a court order to these companies to implement the verification norms issued by the central government.

He said penalties should be imposed on social networking sites and other internet-based companies for non-verification of their users.

The petitioner, at present involved in social service through his organisation Rashtriya Swabhimaan Aandolan, said: "Facebook gross revenue for previous year was approximately $37 billion..."

"...They are not paying due taxes on their Indian operations as per provisions of double taxation avoidance agreement and the government is not taking any action to safeguard the national interest and sovereignty of India."

The petition also said that social networking sites should be directed to ensure verification of all existing and future users and refrain from allowing access to children below 13 years, which against law.

"As per reports, Facebook has further allowed account opening by children below 13 years of age who may be 1/3rd of their registered users just to exploit online gaming market and increase advertisement revenue," the petition said.

"On the basis of unlawful agreements, data of 50 million users is transferred to the US and used for commercial gains in violation of the right to privacy," it said.

"...The country is facing biggest security risks of attacks from anonymous hackers operating through such fake profiles," the petition said.

The petition also sought banning government officers from using social networking websites through computers or network in their offices for protection against threat to sensitive data.

It said that five or six percent accounts on social networking sites were fake or being operated by anonymous users due to non-authentication of details by the company before the opening of accounts.

Govindacharya sought direction to the government to maintain a national register of sexual offenders and other heinous crimes, to prevent them from joining social networking websites.